SAVI Squared products are Derivatives Instruments that offer investors exposure to market volatility through daily realised future variance. Although they are also known as Variance Futures, SAVI Squared contracts are not really Futures. They are a Forward contract on realised annualised variance. The holder agrees to buy or sell variance at a pre-determined strike price at a specified future time. On expiry, the holder receives the difference for every point that the stock’s realised variance has exceeded the variance strike price.
SAVI Squared contracts can be used by a number of market players, including investors who would like to take a direct view on volatility, companies who want to hedge against volatility options, traders who would like to lay off volatility risk and traders who would like to hedge against a decrease in liquidity, which is often accompanied by increased volatility.